Personalized Pricing? It's Everywhere
Two-thirds of consumers are uncomfortable with customized pricing, but it continues to spread.
Imagine: A grocer knows that Shopper A will buy organic mangoes every week, regard-less of price. So whenever Shopper A pulls into the parking lot or signs in to order groceries online, the price of organic mangoes jumps by 40%.
Once confined to a single industry, customized pricing is quietly spreading into many corners of retail. But it remains unpopular: 66% of consumers say that they would stop shopping at a retailer that charged a real-time premium based on their purchase history, according to data from Talker Research. Nearly two-thirds of consumers find the practice alarming.
Now comes a pitched battle that may determine the future of this high-tech practice. Shoppers find customized pricing upsetting precisely because it’s personal: The store is raising your prices, based on your habits and profile. Many states call it surveillance pricing, and many are now seeking to ban it. But retailers are pushing back. “It risks retailers’ ability to manage their margins and optimize their returns,” says Corey Matthiessen, a principal in the Consumer Markets practice at Korn Ferry.
The practice has long featured in the travel industry, which prices airfares and hotels according to metrics like availability—but not according to the personal data or purchase histories of individual shoppers. Consumers and states are quite comfortable with, say, a husband paying sky-high prices for the last two seats on a plane when he’s purchasing a surprise weekend birthday trip for his wife. What they tend to balk at is a hotel or airline raising prices precisely because the wife’s birthday is approaching. “It’s the idea of protecting people from unfair selling practices,” says retail expert Craig Rowley, senior client partner at Korn Ferry.
Still, retailers are keen to push back on legislative action that restricts their freedom to set prices. Currently, new legislation efforts across two dozen blue and red states are creating a patchwork of strategies that are difficult for retailers to track. For example, New York has not banned custom pricing per se, but does require a specific consumer disclosure to accompany any price that an algorithm has calculated using personal data. In Maryland, the rules are sector specific: They ban larger food retailers and third-party food-delivery services from using dynamic pricing based on personal data. In California, steps are underway to prohibit surveillance pricing altogether. “Managing and navigating all the regulatory pieces is becoming more and more complex,” says Matthiessen.
A 2025 report from an ongoing study by the Federal Trade Commission revealed that customized pricing often occurs online, based on everything from a consumer’s mouse movements to the items they’ve left behind in their shopping cart. While some brick-and-mortar stores have electronic shelf labels that can change prices at the touch of a but-ton, the vast majority do not—which suggests that legislation that bans in-person dynamic pricing is premature. “It’s a solution in search of a problem,” says Rowley.
Retailers are quick to point out that the visibility of competitors’ prices online already dis-incentivizes the use of customized pricing. As the industry adage goes, a satisfied customer will tell one or two people, but a dissatisfied customer will tell 10 or 20. On social media, that number can multiply exponentially. Experts advise retailers to prioritize their long-term customer relationships over any short-term profit. A great customer relation-ship depends on fair pricing and transparency, says Rowley. Customers are happy to pay a reasonable price, “but if they’re taken advantage of, they’ll find another retailer,” says Rowley.
Above all, retailers need to monitor legislation, which continues to evolve, state by state. It’s one more thing to watch out for, says Rowley: “Now someone needs to make sure that the manager with a great idea—who doesn’t realize it’s illegal—doesn’t do something dumb.”
Learn more about Korn Ferry’s Organization Strategy capabilities.
